We came across a bullish thesis on Netflix, Inc. (NFLX) on Make Money, Make Time’s Substack by Oliver | MMMT Wealth. In this article, we will summarize the bulls’ thesis on NFLX. Netflix, Inc.’s share was trading at $764.24 as of Oct 22nd. NFLX’s trailing and forward P/E were 43.64 and 32.26 respectively according to Yahoo Finance.
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Netflix (NFLX) delivered a strong Q3 performance, surpassing expectations and reinforcing its position as a leader in the streaming industry. The company reported revenue growth of 2.8% QoQ and 15% YoY, with revenue beating estimates by $57 million. GAAP EPS also exceeded expectations at $5.40, while subscriber numbers surged to 282.7 million, outpacing estimates by 4 million. The net income margin reached an impressive 24.1%, up 450 basis points compared to the same quarter last year, signaling operational efficiency despite competitive pressures.
Despite facing stiff competition from peers like Disney and Amazon Prime, Netflix’s Q3 results have displayed its ability to maintain its competitive edge. Netflix’s strategy of expanding beyond traditional streaming, into areas like live events, gaming, advertising, and international markets, has broadened its total addressable market. The platform’s ability to secure high-profile events, such as the Mike Tyson-Jake Paul boxing match and NFL games, exemplifies its ability to capture large, engaged audiences.
Netflix’s approach to flexible pricing models has also been key to sustaining growth. In some regions, such as Japan, the U.S., and Spain, prices have been raised, while in other markets, the company has introduced lower-priced, ad-supported plans. These ad-supported tiers now account for over 50% of new sign-ups, offering a solution for price-sensitive consumers while allowing Netflix to monetize a broader audience. However, the introduction of ad-supported plans also reflects underlying consumer weakness, highlighting the company’s need to balance affordability with profitability.
The ad platform, still in its early stages, offers significant long-term potential. Despite growing competition in the digital advertising space, Netflix’s unmatched audience engagement provides a unique value proposition to advertisers. As companies increasingly invest in digital ads, Netflix stands out by offering premium placements in highly anticipated content, positioning itself as a future leader in this lucrative market. With strong user engagement, the company can command high CPMs, giving it a competitive edge over other platforms.
International expansion remains another key opportunity for Netflix. Revenue growth of 16% YoY in both the U.S. and Canada and EMEA markets, alongside 19% growth in Asia Pacific and 9% in LATAM, demonstrates Netflix’s ability to scale globally, although volatility remains in emerging markets.
Basically, the bullish thesis on Netflix stems from the fact that the company is diversifying its revenue streams and expanding its total addressable market (TAM). Netflix’s venturing into live events, gaming, and introducing lower-cost, ad-supported plans are opening up new growth opportunities beyond traditional streaming. Additionally, Netflix’s high user engagement makes it an attractive platform for advertisers, positioning the company as a strong contender in the digital advertising space. Lastly, international markets, especially Asia-Pacific and Latin America, present significant growth opportunities, further enhancing its global scale and long-term potential.
Netflix, Inc. is on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 103 hedge fund portfolios held NFLX at the end of the second quarter which was 107 in the previous quarter. While we acknowledge the risk and potential of NFLX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.